InvestEd Plan Overview

There are many ways to save for college and many choices to make. The InvestEd Plan makes saving simple. Consider these benefits:

Control, flexibility and transferability

When you open an InvestEd account, you are the "owner" of the account for the benefit of your selected beneficiary, such as your child, grandchild, niece or nephew. So, if your selected beneficiary chooses not to go to college, you can simply transfer the account to another direct family member of the beneficiary or if you simply want to change the beneficiary you may. Also, any U.S. citizen or resident, including your friends or relatives, can contribute to the InvestEd account.

High contribution limits, no income restrictions

With the InvestEd Plan, you can make contributions, until a maximum balance of $340,000 (2009-2010 academic year) is reached for all Program accounts per beneficiary. Plus, there are no income restrictions on the account owner, so you'll remain eligible to maintain your InvestEd account regardless of your income.

Tax advantages

Earnings in your InvestEd Plan account grow federal income tax-deferred. And all withdrawals are federal income tax-free if they are applied to qualified higher education expenses, such as tuition, fees, room and board, and books. Please note that state and local taxes may apply. States may offer some tax breaks such as a deduction for contributions or income exemption on withdrawals.This information is based on current tax laws, regulations, rules and interpretations, which are subject to change at any time. Please consult your tax advisor regarding your individual circumstances.

The availability of tax or other benefits may be conditioned on meeting certain requirements, such as residency or purpose for or timing of distributions. Taxes are deferred until withdrawal. The earnings portion of a non-qualified withdrawal is subject to a 10% penalty as well as federal and/or state taxes.

Estate planning advantages

Especially important for grandparents or other relatives, contributions to an InvestEd account are excluded from the donor's taxable estate for federal tax purposes (assuming the donor is not the beneficiary). Thanks to the annual gift tax exclusion, grandparents, other relatives and friends can contribute up to $65,000 ($130,000 for married couples) to each beneficiary and spread the contribution over five years for gift tax purposes, as long as they do not make additional contributions to the same beneficiary during the five years, by making an election on the federal gift tax return. Please remember that if the contributor dies before the end of the five-year period, the portion of the gift allocable to the years remaining in the five-year period would be in the contributor's estate for federal estate tax purposes.

It's easy to get started

You can become InvestEd with as little as $500, or you can start with only $50 if you contribute that amount regularly with an automatic investment plan created through InvestEd's Automatic Investment Service (AIS). As with any investment, there can be no assurance that periodic purchases using AIS will produce a profit or protect against investment loss in declining markets.

Investors should consider the investment objectives, risks, charges and expenses associated with the InvestEd Plan carefully before investing. This and other information is found in the Waddell & Reed InvestEd Portfolios, Inc. prospectus, and the Ivy Funds prospectus, the InvestEd Program Overview, and the InvestEd Account Application, all of which can be obtained from your financial advisor. Please read these materials carefully before investing. An investor should also consider, before investing whether the investor's or designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's 529 college savings plan.

Investment return and principal value will fluctuate, and it is possible to lose money by investing.

The InvestEd Plan is offered by Waddell & Reed, Inc. as part of the Arizona Family College Savings Program (the "Program"). Waddell & Reed, Inc. is one of multiple financial institutions eligible to offer investments under the Program. Accounts are not insured by the State of Arizona, the Trust, the Arizona Commission for Postsecondary Education, or any other governmental entity, Waddell & Reed, Inc., or any affiliated or related party, and neither the principal deposited nor the investment return is guaranteed by any of the above referenced parties.

The Waddell & Reed InvestEd Portfolios, Inc. are managed by Waddell & Reed Investment Management Company, while the Ivy Funds are managed by Ivy Investment Management Company, both of which are affiliates of Waddell & Reed, Inc. Waddell & Reed InvestEd Portfolios and the Ivy Funds are distributed by Waddell & Reed, Inc., and Ivy Funds Distributor, Inc., respectively.